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  • Question on social security tax withholding

    Hi, I have a question that I am not too sure on, would like to see if anyone else encounters this issue:

    I have a W2 income that generate approximately 180k/yr, which exceeds the max social security tax cap.

    I also have 1099 incomes which goes to my S-Corp. On ADP when I do payroll to myself, is there a way to Not withhold anymore social security tax?

    Or does it have to be withheld and at year end, the overpaid amount will be calculated back to me? What about the employer portion of the social security tax, does it have a cap? and if so, any overpaid amount will also be returned?

    Thanks in advance
    David

  • #2
    no there is no way to not withhold SS from payroll at either job

    and while any excess SS you pay personally will be returned via your tax return, you will not get any “excess” employer SS tax returned

    this is precisely why it is rarely a smart move to have an S Corp for 1099 income when you already have W2 income over the SS wage base.

    Comment


    • #3
      Some other sources say employer can also request reimbursement of overpaid FICA:

      "With respect to over-payments of FICA taxes (or RRTA), in Revenue Procedure 2017‑28, the IRS clarifies the basic requirements for both a request for employee consent and for the employee consent and permits employee consent to be requested, furnished and retained in an electronic format. The revenue procedure also contains guidance regarding what constitutes “reasonable efforts” if employee consent is not acquired so that the employer can still claim a credit or refund of the employer share of overpaid FICA (or RRTA) taxes."

      "Employers as well as employees make FICA tax payments to the IRS, therefore the employer may have also overpaid. Your employer may claim an overpayment from the IRS as long as he reimburses the employee as well for the excess payroll tax. The employer must file an adjusted business tax return, and the IRS will then apply the overpayment as a credit on any future taxes due."

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      • #4
        The devil is in the definition of over payment. Each employer is a stand alone responsibility and did not over pay.

        Comment


        • #5
          Tim is correct.

          An overpayment and Rev. Proc. 2017-28 only applies when a single employer fails to stop deducting Social Security (SS) taxes when the SS maximum taxable earnings (MTE) (2020 = $137,700, 2021 = $142,800) is exceeded.

          As identified by you and pointed out by jacoavlu, you have no overpayments. You have excess SS taxes withheld by multiple employers. Your sole remedy is the Form 1040 credit of the employee share.

          Comment


          • #6
            This is the exact reason why you should NOT use an S-corp for your side income when your main job is W-2. There's no way to recover the excess employER portion of Social Security.

            You'll get a credit for the extra employEE portion but not the extra employER portion. Each unrelated employer has to climb the social security ladder with every employee.

            Stop using an S-corp for your 1099 income.

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            • #7
              Originally posted by Tim View Post
              The devil is in the definition of over payment. Each employer is a stand alone responsibility and did not over pay.
              oh ok, I see. This is different from what my CPA tells me.

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              • #8
                Originally posted by davidlg16 View Post

                oh ok, I see. This is different from what my CPA tells me.
                The devil is in the definition of different. EIN of the employer?

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                • #9
                  Not sure your CPA is giving you the advice you are paying for. S-corp may not be appropriate, iow. Run a cost-benefit analysis (not sure if I would trust your CPA’s #s, fwiw).
                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                  • #10
                    Is this only if the 1099 employer also withholds SS?

                    Comment


                    • #11
                      Originally posted by cstroud View Post
                      Is this only if the 1099 employer also withholds SS?
                      1099 contract workers are not paid by an "employer" and the contractor does not w/h SS taxes.
                      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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